The impact of cryptocurrencies market development on banks’ deposits variability in the GCC region

Purpose With the continuing development of the financial technology revolution, a better understanding of bank deposits variability has become necessary for bank management and policymakers, especially central banks. This is because the novel innovations of cryptocurrencies operate beyond the realm...

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Main Authors:	Othman, Anwar Hasan Abdullah, Syed Jaafar Alhabshi, Syed Musa, Kassim, Salina, Ashurov, Sharofiddin
Format:	Article
Language:	English English
Published:	Emerald Publisher 2019
Subjects:	HD61 Risk Management HG1501 Banking HG201 Money HG3368 Islamic Banking and Finance
Online Access:	http://irep.iium.edu.my/73980/ http://irep.iium.edu.my/73980/ http://irep.iium.edu.my/73980/ http://irep.iium.edu.my/73980/1/73980-impact%20of%20cryptocurrencies%20market%20development%20on%20banks%E2%80%99.pdf http://irep.iium.edu.my/73980/7/73980_The%20impact%20of%20cryptocurrencies%20market%20development%20on%20banks%E2%80%99%20deposits%20variability%20in%20the%20GCC%20region_Scopus.pdf

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spelling	iium-739802019-11-24T11:59:31Z http://irep.iium.edu.my/73980/ The impact of cryptocurrencies market development on banks’ deposits variability in the GCC region Othman, Anwar Hasan Abdullah Syed Jaafar Alhabshi, Syed Musa Kassim, Salina Ashurov, Sharofiddin HD61 Risk Management HG1501 Banking HG201 Money HG3368 Islamic Banking and Finance Purpose With the continuing development of the financial technology revolution, a better understanding of bank deposits variability has become necessary for bank management and policymakers, especially central banks. This is because the novel innovations of cryptocurrencies operate beyond the realm of the banking system, which may impact the performance of banks and their deposits variability. This study aims to investigate the long- and short-run effects of cryptocurrencies’ market capitalization development on the banks’ deposit variability in the Gulf Cooperation Council (GCC) region. Design/methodology/approach In this study, the Johansen–Juselius (1990) cointegration test with vector error correction model was applied to examine the long-run relationships, while the Engle and Granger (1987) and the Granger (1969) causality tests were used to detect causal relationships in the short term. Findings The findings of Johansen–Juselius cointegration test indicate that the banks’ deposits variability in all six states of the Gulf region share negative long-run equilibrium association with the development of global cryptocurrencies market capitalization, but with different statistically significant levels. For the short-run analysis, the study found that the development of cryptocurrencies market capitalization has significant unidirectional causal effects on bank deposits variabilities in only four states, namely, UAE, Qatar, Kuwait and Bahrain. The findings of the study therefore suggest that to eradicate the effects of cryptocurrencies industry and its threats to the banking industry, banks in GCC region are encouraged to either consider cryptocurrencies as an alternative investment asset for their portfolio investment diversification strategies or adopt the blockchain technology in their operation system to facilitate their customers with low transaction cost, high level of security and ease of use and real-time settlement. Research limitations/implications The empirical findings of the study will provide valuable input for policymakers, especially central banks and bank managements, to evaluate the current situation and the threats of the cryptocurrencies market growth and its effect on the banking industry’s performance, future survival and their deposits variability for better regulation and policy planning and investment strategies. Originality/value This is a pioneering study that empirically explores the phenomenon of bank deposits variability as a consequence of expansion in cryptocurrencies market capitalization, where the findings proved evidence of a drastic decline in banks’ deposits size due to the substantial growth in cryptocurrencies market capitalization. Emerald Publisher 2019-07-29 Article PeerReviewed application/pdf en http://irep.iium.edu.my/73980/1/73980-impact%20of%20cryptocurrencies%20market%20development%20on%20banks%E2%80%99.pdf application/pdf en http://irep.iium.edu.my/73980/7/73980_The%20impact%20of%20cryptocurrencies%20market%20development%20on%20banks%E2%80%99%20deposits%20variability%20in%20the%20GCC%20region_Scopus.pdf Othman, Anwar Hasan Abdullah and Syed Jaafar Alhabshi, Syed Musa and Kassim, Salina and Ashurov, Sharofiddin (2019) The impact of cryptocurrencies market development on banks’ deposits variability in the GCC region. Journal of Financial Economic Policy, 11 (4). pp. 1-24. ISSN 1757-6385 https://www.emerald.com/insight/content/doi/10.1108/JFEP-02-2019-0036/full/html https://doi.org/10.1108/JFEP-02-2019-0036
repository_type	Digital Repository
institution_category	Local University
institution	International Islamic University Malaysia
building	IIUM Repository
collection	Online Access
language	English English
topic	HD61 Risk Management HG1501 Banking HG201 Money HG3368 Islamic Banking and Finance
spellingShingle	HD61 Risk Management HG1501 Banking HG201 Money HG3368 Islamic Banking and Finance Othman, Anwar Hasan Abdullah Syed Jaafar Alhabshi, Syed Musa Kassim, Salina Ashurov, Sharofiddin The impact of cryptocurrencies market development on banks’ deposits variability in the GCC region
description	Purpose With the continuing development of the financial technology revolution, a better understanding of bank deposits variability has become necessary for bank management and policymakers, especially central banks. This is because the novel innovations of cryptocurrencies operate beyond the realm of the banking system, which may impact the performance of banks and their deposits variability. This study aims to investigate the long- and short-run effects of cryptocurrencies’ market capitalization development on the banks’ deposit variability in the Gulf Cooperation Council (GCC) region. Design/methodology/approach In this study, the Johansen–Juselius (1990) cointegration test with vector error correction model was applied to examine the long-run relationships, while the Engle and Granger (1987) and the Granger (1969) causality tests were used to detect causal relationships in the short term. Findings The findings of Johansen–Juselius cointegration test indicate that the banks’ deposits variability in all six states of the Gulf region share negative long-run equilibrium association with the development of global cryptocurrencies market capitalization, but with different statistically significant levels. For the short-run analysis, the study found that the development of cryptocurrencies market capitalization has significant unidirectional causal effects on bank deposits variabilities in only four states, namely, UAE, Qatar, Kuwait and Bahrain. The findings of the study therefore suggest that to eradicate the effects of cryptocurrencies industry and its threats to the banking industry, banks in GCC region are encouraged to either consider cryptocurrencies as an alternative investment asset for their portfolio investment diversification strategies or adopt the blockchain technology in their operation system to facilitate their customers with low transaction cost, high level of security and ease of use and real-time settlement. Research limitations/implications The empirical findings of the study will provide valuable input for policymakers, especially central banks and bank managements, to evaluate the current situation and the threats of the cryptocurrencies market growth and its effect on the banking industry’s performance, future survival and their deposits variability for better regulation and policy planning and investment strategies. Originality/value This is a pioneering study that empirically explores the phenomenon of bank deposits variability as a consequence of expansion in cryptocurrencies market capitalization, where the findings proved evidence of a drastic decline in banks’ deposits size due to the substantial growth in cryptocurrencies market capitalization.
format	Article
author	Othman, Anwar Hasan Abdullah Syed Jaafar Alhabshi, Syed Musa Kassim, Salina Ashurov, Sharofiddin
author_facet	Othman, Anwar Hasan Abdullah Syed Jaafar Alhabshi, Syed Musa Kassim, Salina Ashurov, Sharofiddin
author_sort	Othman, Anwar Hasan Abdullah
title	The impact of cryptocurrencies market development on banks’ deposits variability in the GCC region
title_short	The impact of cryptocurrencies market development on banks’ deposits variability in the GCC region
title_full	The impact of cryptocurrencies market development on banks’ deposits variability in the GCC region
title_fullStr	The impact of cryptocurrencies market development on banks’ deposits variability in the GCC region
title_full_unstemmed	The impact of cryptocurrencies market development on banks’ deposits variability in the GCC region
title_sort	impact of cryptocurrencies market development on banks’ deposits variability in the gcc region
publisher	Emerald Publisher
publishDate	2019
url	http://irep.iium.edu.my/73980/ http://irep.iium.edu.my/73980/ http://irep.iium.edu.my/73980/ http://irep.iium.edu.my/73980/1/73980-impact%20of%20cryptocurrencies%20market%20development%20on%20banks%E2%80%99.pdf http://irep.iium.edu.my/73980/7/73980_The%20impact%20of%20cryptocurrencies%20market%20development%20on%20banks%E2%80%99%20deposits%20variability%20in%20the%20GCC%20region_Scopus.pdf
first_indexed	2023-09-18T21:44:52Z
last_indexed	2023-09-18T21:44:52Z
_version_	1777413382856507392

The impact of cryptocurrencies market development on banks’ deposits variability in the GCC region

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